Earl Russell: My Lords, I congratulate the noble Lord, Lord Rix, on the persistence and determination with which he has pursued the issue. I congratulate him also on the remarkable ingenuity of his present amendment, and on its elegance. It gives the Government a degree of flexibility that normally exists only in Whitehall's daydreams. I also offer congratulations to my honourable friend Mr Rendel, who first raised the issue in another place and discovered what I believe is still the latest example of misinformation known to us, which is as recent as April of this year.

That example illustrates that this is not a party matter. We have here not a failing of any political party, but of government. It is therefore proper for government to answer that failure. A great many people have either taken actions or failed to take actions which they would otherwise have taken as a consequence of that inaccurate information. The equitable case for some form of compensation is very strong indeed. We have hitherto been arguing about exactly what form that should take. The noble Lord does not mind which method the Government use, but they must use one of them. I shall go along with that.

We have had a lot of argument in the past about the difficulty of discovering exactly who has been misinformed. I understand that difficulty, but if the Government were to be too impressed by that argument, or if they did not wish to accept the amendment of the noble Lord, Lord Rix, they might find that they were left with my Amendment No. 102,

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which is in this group. It has the merit of great simplicity. It simply postpones the introduction of the change by 10 years to allow people to make the necessary provision. However, I believe that the Minister would find that extremely expensive. I do not know what she is going to do in respect of the amendment in the name of the noble Lord, Lord Rix, but if she has been making her financial calculations, she would be well advised to accept it:

Always keep a-hold of Nurse

For fear of finding something worse".

Lord Davies of Coity: My Lords, I support the main and overwhelming thrust of the Bill because it is intended to reform the welfare and pensions provisions. However, it is intended to do not only that; it is intended to reform those provisions to ensure a greater degree of fairness, and to enable those people who most need help to receive it. I agree that the noble Lord, Lord Rix, has drawn attention to a particular anomaly which will undoubtedly display discrimination. Whether we like it or not, that discrimination was brought about as a result of what was done by the previous administration in 1986. The time bomb was set ticking then and will explode in April next year unless it is corrected. That means that one widow will receive the full entitlement and another widow will receive half the entitlement, depending on which day the husband dies. That is how close it is.

Given the opposition presented by the Labour Opposition in the House of Commons in 1986, I believe that the Government should seriously consider removing that discrimination. They are not responsible for what happened in 1986, but they can correct it now. I certainly hope that the Minister will give us some relief on that matter.

Lord Renton: My Lords, I have been a widower for the past 13- years. I am now in my 90s. When one's wife died, one noticed and felt keenly that one became a one-man band. One had to do a lot of things which one had never contemplated doing before. Fortunately, thanks to the pension arrangements and my own savings, that did not hurt me financially. But I can imagine that it would hurt a good many people financially, husbands as well as wives.

Therefore, although I broadly support this amendment, I think that perhaps some kind of means test is desirable. Generally speaking I do not like means tests, but obviously if one spouse dies, the other spouse may not be left with sufficient funds to keep things going. He or she may then become dependent upon employing somebody who was not employed before or who must be employed to a greater extent. That is so in my case--our housekeeper now has to do far more than she used to do. So I believe there is a case of substance here and that it is a matter which applies as much to widowers as to widows.

4.30 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, the new clause proposed by the

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noble Lord, Lord Rix, requires the Secretary of State to introduce regulations which have to be approved by both Houses of Parliament to alter the amount of SERPS payable to widows and widowers or either to put off the changes to SERPS for widows and widowers or to compensate those affected by the change. If no regulations were made, the new clause proposed by the noble Lord, Lord Rix, to which I refer at the moment, envisages that the current rules, whereby widows and widowers may inherit all their spouse's SERPS, continue to apply.

The noble Lord, Lord Rix, has also tabled a second amendment which would introduce a phased method of compensation. That proposal was debated in Committee. It would introduce a complex formula to provide compensation on a sliding scale for people who had paid contributions over the affected time period. The rate of compensation payable would depend upon the length of time for which contributions had been paid, with those who had paid contributions between 1978 and 1986 receiving full compensation and those thereafter a reduced sum. There are consequences to this amendment; for example, that the same amount of SERPS might be in payment but, if Mr A had built it up over a longer time than Mr B, Mr A's widow's pension would be that much higher. Therefore there are difficulties with that amendment although it seeks to engage with a very difficult issue: that those closest to that decision are those least likely to be able to adjust their financial circumstances.

The amendments proposed by the noble Lord, Lord Higgins, and other noble Lords would prevent implementation of the change unless the Government had introduced by 5th April 2000 a scheme to compensate those people who had not been able to make alternative provision because they had received inadequate or misleading information from the department. As I explained in Committee, to reverse the change or introduce an open-ended compensation scheme would have the same early and very costly effect but would also carry with it a bill for future expenditure which would continue to increase.

The Liberal Democrat amendment moved by the noble Earl, Lord Russell, would delay the change until 2010. The cumulative cost of that is, I believe, well known. It would be more than £5.5 billion by 2010 with a continuing cost of £1 billion a year for some time after that. We may well be talking about £10 billion or £11 billion or more in total--huge sums of money.

These proposals were debated in Committee and, as I made clear then, the Government recognise that the situation they have inherited is intolerable. The previous government enacted the changes to inherited SERPS 13 years ago. The implementation date was set for April 2000 so that 14 years' notice was given to allow people who might be affected plenty of time to alter their financial arrangements. That government promised wide publicity of the changes yet they did nothing. Not only did they not publicise those changes as they had a duty to do, but they effectively denied

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that any change would happen in terms of the misleading advice that people continued to receive. Misleading information that no change would take place even as the change had already happened in law continued to be given to people under the previous administration for 14 years.

When this Government came into office, they knew nothing of the problem and found out about it only at the end of last year. Since then they have been exploring the problem and all the options for putting the matter right. As noble Lords have said and as the noble Lord, Lord Rix, expressed so eloquently, there is widespread concern about this matter, as he argued in Committee. Many people are deeply worried and they want to know what the Government are proposing to do to put it right. As I have said, there is no easy answer. It is a multi-billion pound problem. Should the Government delay or phase in the change, it would cost £5.5 billion by 2010 with a continuing cost of around £1 billion a year, taking it up to £10 billion or more in total.

We cannot accept the amendment in the name of the noble Lord, Lord Higgins. It attempts to compensate individuals who have received incorrect information and subsequently acted to their detriment or failed to act to their benefit. That could result in paying out less but could result in a big bill for administration. It would also take time to set up. Questions of proof of misinformation, etc, as I think the House acknowledges, would be very complex. Letters or relevant records have probably been scrapped by now; phone calls have probably not been recorded; and there is probably no evidence of counter inquiries.

The noble Lord, Lord Higgins, said that it was not a party matter. I agree that seeking to resolve the problem is not a party matter. It is, however, a party matter which we inherited and it is a mess with which we are trying to deal.

As I believe the noble Lord, Lord Rix, is acknowledging with his proposed new clause, it is important to get the decision right. It is complex; it is expensive. The problem has taken 12 years to emerge. We have not yet had 12 months to resolve it, and we are talking about billions and billions of pounds.

Proposals put forward by the noble Lords, Lord Higgins and Lord Goodhart, would force the Government into introducing a compensation scheme or deferring the change. In contrast, the noble Lord, Lord Rix, with his new clause, is seeking to provide a legislative base for a range of decisions although he has made clear his favourite option in Amendments Nos. 101 and 103. Therefore, the new clause would enable the Government to act in time because legislation in the next parliamentary Session could be too late for some of these options without pre-empting the final decisions.

I can tell the House that the Government will announce the way forward on this exceptionally difficult issue before this Bill completes its passage. Since that is the case and given that the amendment of

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the noble Lord, Lord Rix, does not prejudge the outcome of our deliberations, I am extremely happy to accept it today.